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TYH2 is under some pressure at the re-open after recovering from NY lows on Tuesday, as Asia-Pac participants react to the hawkish rhetoric deployed by Fed Chair Powell during NY hours. The contract trades -0-08 at 130-18.

  • A reminder that the cash Tsy curve saw twist flattening around the 5- to 7-Year zone on Tuesday, with 2s cheapening by ~8bp, while 30s were ~6bp richer come the bell.
  • Early risk-off flow was observed in the wake of cautious comments from Moderna’s CEO re: battling Omicron. These headlines shaped broader pre-NY dealing/sentiment, before Fed Chair Powell testified on the Hill, and lingered in the long end of the curve post-Powell. Powell’s commentary was much more hawkish when compared to the initial pre-released comments, as he flagged considerations of a faster tapering pace and the need to retire the term “transitory” when it comes to inflation. Steepener stop outs helped drive the broader post-Powell impetus, while a large FV/UXY block flattener was observed (-14,021/+5,650) in early NY dealing (pre-Powell). A large screen seller of FVF2 121.00 puts was also observed during NY hours (~55K lots).
  • The long end potentially drew some support from month-end extensions and the Fed’s double buyback.
  • Chinese Caixin manufacturing PMI and Australian GDP headline during Asia-Pac hours. U.S. hours will be headlined by the ADP employment print and ISM m’fing survey. Elsewhere, the Fed will release the Beige Book ahead of its December meeting.